Techno-economic impact of e-commerce : future development of value chains.
Date: 2011-08-02
Institutions: Institute for Prospective Technological Studies
Subjects: business management, company modernisation, company research, economic policy, electronic commerce, trade policy

TECHNO-ECONOMIC IMPACT OF E-COMMERCE:
FUTURE DEVELOPMENT OF VALUE CHAINS

REPORT ON A WORKSHOP HELD AT THE
INSTITUTE FOR PROSPECTIVE TECHNOLOGICAL STUDIES (IPTS)
SEVILLE, SPAIN
ON 5-6 JUNE 2001

P. Desruelle, P. Verhoest, K. Ducatel, J.-C. Burgelman,
M. Bogdanowicz & Y. Punie1

November 2001

EUR 20123 EN

ACKNOWLEDGEMENTS

The  authors  would  like  to  thank  first  the  workshop  participants  for  the  quality  of  their
interventions,  for  their  enthusiasm  during  the  workshop  and  for  the  constructive
comments they made on the draft version of this report. We are also grateful to the EBIP
project partners  - the OECD and  TNO-STB  -  for  having  supported  the  organisation  of
this  workshop  as  part  of  the  project.  Finally,  we  gratefully  acknowledge  the
methodological  support  from  our  IPTS  colleague  Ms.  Fabiana  Scapolo  during
preparation of the workshop.

1 

Prof. Pascal Verhoest is with TNO-STB in Delft, NL. All the other authors are with IPTS (full contact
details are in Annex I)

                                                
European Commission

Joint Research Centre (DG JRC)

Institute  for  Prospective  Technological
Studies

http://www.jrc.es

Legal notice

Neither  the  European  Commission  nor
any  person  acting  on  behalf  of  the
Commission  is  responsible  for  the  use
which  might  be  made  of  the  following
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Report EUR 20123 EN

© European Communities, 2001

Reproduction  is  authorised  provided  the
source is acknowledged.

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Techno-Economic Impact of E-Commerce

PREFACE

A lot of uncertainty surrounds the development of e-commerce. Confidence in the "new"
economy  has  sharply  fallen  in  the  recent  months  and  repeated  bankruptcies  of  once
famous  dot.com's  hardly  make  the  headlines  anymore.  There  is  however  an  undeniable
long-term trend which perhaps was hidden behind the new economy "bubble". This trend
is  the  adoption  of  e-commerce  technologies  by  economic  actors  in  order  to  more
efficiently manage information exchange with business partners and in order to improve
internal efficiency as well.

Large companies are experimenting with e-commerce tools to explore how they can "re-
invent  themselves"  but  also,  more  prosaically,  in  order  to  become  more  profitable.
Adoption of e-commerce technologies is for many companies part of the current or next
wave of ICT tool deployment. This time, however, the tools so deployed not only cover
internal company operations, but also the links the company has with its trading partners.

The  new  e-commerce  tools  have  the  potential  to  change  the  nature  of  relationships
between companies, raising the following questions:

-  How will e-commerce change the way economic actors work and interact?
-  Will e-commerce thus affect the structure of value chains and how?

A  project  recently  completed  by  the  OECD  and  others,  the  Electronic-commerce
Business  Impacts  Project  (EBIP),  aimed  to  improve  understanding  of  the  way  e-
commerce  (essentially  B2B)  influences  different  economic  sectors  and  the  implications
for policy. Ten OECD member countries, including six EU countries, participated in the
project.  Interviews  were  conducted  in  these  countries  with  more  than  170  "pro-active"
companies from about fifteen economic sectors. Interviews were structured according to
a common questionnaire developed by the Dutch institute TNO-STB, based on a previous
project  with  the  Dutch  Telematica  Instituut:  "Impacts  and  Perspectives  of  Electronic
Commerce" (IPEC).

IPTS,  together  with  OECD  and  TNO-STB,  contributed  to  the  analysis  of  the  national
studies  and  to  the  cross-country  synthesis  report.  In  accordance  with  its  mission  of
providing prospective techno-economic analyses, IPTS also organised a workshop on 5-6
June 2001  to explore the impact  of  e-commerce technologies on future development  of
value  chains,  in  a  time  horizon  extending  to  the  year  2005.  Experts  invited  to  the
workshop included those from automotive, textile (clothing), travel and banking sectors,
and had been involved in national EBIP studies in their respective countries.

This report offers a view of how the factors that drive  companies  to adopt e-commerce
are  expected  to  evolve  in  the  coming  five  years.  Using  as  examples  the  four  economic
sectors represented, it explores how value-chains or segments of value chains may evolve
as a result of the development of e-commerce. The report provides some initial answers
to the above questions, explaining in particular that even if e-commerce technologies will
certainly  be  adopted  by  all  the  economic  actors  to  some  degree,  the  impact  of  these
technologies on value chains is expected to vary widely as a function of sector-specific
characteristics.

Bernard Clements and Paul Desruelle, IPTS, Seville

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Workshop Report

CONTENTS:

EXECUTIVE SUMMARY.......................................................................................................................... 5

DRIVERS FOR 2005..................................................................................................................................... 5
FUTURE DEVELOPMENT OF VALUE CHAINS ................................................................................................. 5
CONCLUSIONS ............................................................................................................................................ 6

INTRODUCTION........................................................................................................................................ 9

1.1. OBJECTIVE OF THE WORKSHOP ......................................................................................................... 9
1.2. BACKGROUND .................................................................................................................................. 9
1.3.
INTERACTION BETWEEN INDIVIDUAL FIRMS AND VALUE CHAIN CHARACTERISTICS. .......................... 9
1.4. APPROACH...................................................................................................................................... 10

2.

TODAY’S AND TOMORROW’S DRIVERS................................................................................ 11

2.1. PRESENTATION OF TODAY’S DRIVERS ............................................................................................. 11
External drivers.................................................................................................................... 11
2.1.1.
2.1.2.
Firms’ motivations ............................................................................................................... 11
2.1.3. Obstacles/incentives ............................................................................................................. 12
2.2. DISCUSSION OF EVOLUTION OF THE DRIVERS IN THE FUTURE .......................................................... 12
Stable drivers ....................................................................................................................... 13
2.2.1.
2.2.2.
New drivers .......................................................................................................................... 13
2.2.3. Drivers which disappeared from the list .............................................................................. 14

3.

IMPACT ON DEVELOPMENT OF E-COMMERCE IN THE SECTORS............................... 15

3.2.1.
3.2.2.

3.1. GENERAL BUSINESS ENVIRONMENT ISSUES..................................................................................... 15
3.1.1. Globalisation/Liberalisation ................................................................................................ 15
Policies: Regulations, Industrial policy,  Environmental policy.......................................... 16
3.1.2.
Inherited industrial structure ............................................................................................... 17
3.1.3.
3.2. COMPETITIVE AND SECTORAL ISSUES.............................................................................................. 18
Inclusion/Exclusion/Dominance........................................................................................... 18
Competitive  positioning....................................................................................................... 19
3.3. ORGANISATIONAL AND INTER-FIRM ISSUES ..................................................................................... 19
Lock-in ................................................................................................................................. 19
Customer Relationship Management ................................................................................... 20
Value Chain Coordination ................................................................................................... 21
3.4. FIRM LEVEL ISSUES ......................................................................................................................... 22
Cost reduction ...................................................................................................................... 22
Added value: Quality/Speed ................................................................................................. 22

3.3.1.
3.3.2.
3.3.3.

3.4.1.
3.4.2.

4.

FUTURE DEVELOPMENT OF VALUE CHAINS...................................................................... 25

4.1. PROPOSED SCHEMES....................................................................................................................... 25
4.2. THE DISCUSSION PER SECTOR ......................................................................................................... 26
Textile................................................................................................................................... 26
Automobile ........................................................................................................................... 28
Banking ................................................................................................................................ 29
Travel ................................................................................................................................... 30

4.2.1.
4.2.2.
4.2.3.
4.2.4.

5.

CONCLUSIONS............................................................................................................................... 31

5.1. MAIN FUTURE DRIVERS FOR E-COMMERCE: FROM INTERNAL COORDINATION TOOLS TO

INSTRUMENTS FOR EXTERNAL COORDINATION................................................................................ 33
IMPACT OF ADOPTION OF E-COMMERCE TECHNOLOGIES ON VALUE CHAINS .................................... 33
5.2.
5.3. FUTURE POLICIES............................................................................................................................ 34
5.4. PROPOSAL OF A MODIFIED MARKET STRUCTURE DIAGRAM ............................................................. 35
5.5. ON THE WORKSHOP ITSELF.............................................................................................................. 36

ANNEX I: List of Workshop Participants

ANNEX II: Workshop Background Document

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Techno-Economic Impact of E-Commerce

EXECUTIVE SUMMARY

The  overall  objective  of  the  workshop  was  to  explore  the  impact  of  e-commerce
technologies on future development of value chains, with a horizon of 2005.

This workshop was organised in the context of the OECD Electronic-commerce Business
Impacts Project (EBIP). This project aims to improve understanding of the impact of e-
commerce  (essentially  B2B)  on  economic  sectors  and  of  its  policy  implications.  Ten
OECD  member  countries,  including  six  EU  countries,  participated  in  the  project.
Interviews,  based  on  a  common  questionnaire,  were  conducted  in  these  countries  with
more than 170 companies from about fifteen economic sectors, mostly in Year 2000. A
final report is expected to be published by OECD in the Autumn of 2001.

As  part  of  its  contribution  to  EBIP,  IPTS  organised  this  workshop  with  a  view  to
exploring the future impact of e-commerce. The workshop was held on 5-6 June 2001 at
the  IPTS-JRC  institute  of  the  European  Commission  in  Seville,  Spain.  The  experts
participating  in  the  workshop  were  from  the  following  economic  sectors:  automotive,
textile  (clothing),  travel  and  banking.  The  workshop  discussions  centred  around  the
following stages:

-  First, identification of a list of the most important future drivers (2005 horizon) that
will have an impact on adoption of e-commerce technologies by businesses, based on
an  initial  list  of  drivers  identified  in  the  different  EBIP  national  studies,  and
assessment of the magnitude of their impact on the four sectors represented.

-  Then, brainstorming on how value chains in the four sectors could evolve as a result

of adoption of e-commerce technologies by companies.

-  Finally,  drawing  of  conclusions  on  impact  of  e-commerce  technologies  on  value

chains.

Drivers for 2005

A  number  of  the  drivers  identified  in  the  EBIP  national  studies  were  seen  as  likely  to
remain relevant by 2005.  These were, for example, globalisation, liberalisation, and the
motivation of companies to reduce costs, to improve both internal co-ordination and the
co-ordination  of  the  value  chain,  and  to  better  manage  relationships  with  customers.
Some new drivers were added to the list: for example, the impact of/on policies and the
influence  of  “inherited  industrial  structures”  (including  cultural  factors,  inter-firm
organisational constraints or barriers to adoption by customers). This last driver can act in
both directions,  either  fostering  adoption  of  e-commerce  solutions  by  firms,  or  slowing
down this adoption. A number of factors that are important today were seen as becoming
less  important  in  the  future  (e.g.  technological  factors  -including  security,  bandwidth,
etc.-, investment factors and internal organisational factors). In the report, the reader will
find  more  details  on  the  expected  future  impact  of  these  drivers  in  the  four  sectors
covered.

Future development of value chains

Following  the  discussions  on  the  impact  of  future  drivers,  scenarios  of  future
development of value chains in the different sectors, as a result of adoption by firms of e-

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commerce  technologies,  were  explored.  The  objective  of  this  exercise  was  to  describe
possible futures and to provide “food for thought”. In each sector a number of  possible
scenarios were identified as a function of market characteristics (such as the number of
firms in the market, the presence or absence of dominant  firms). In the case of the two
sectors  involving  intangible  goods  (travel  and  banking)  different  scenarios  were  also
identified as a function of the diversity of the actors in the market and of the diversity of
the exchanged products. Market characteristics were found to be useful in order to focus
the  discussion  on  particular  parts  of  the  value  chain,  characterised  by  their  specific
“market system”.

Conclusions

What emerged clearly from the workshop was the view that e-commerce in 2005 will still
be primarily a tool for companies to improve their internal coordination, that is, to reduce
input  costs  and  increase  output  value  (e.g.  better  quality,  more  added  value,  increased
customer reach, etc.). Second, improved co-ordination is expected to extend from internal
relationships to relationships with value-chain partners. Dominant firms are expected to
play  a  pivotal  role  in  this  enlarged  coordination  process.  In  this  respect,  of  the  four
sectors analysed (and, in all probability, of many sectors of the economy), the automobile
sector seems to be the most advanced today.  However, even the upper part of the value
chain  (linking  the  suppliers  to  the  car  manufacturers)  may  still  be  several  years  away
from complete “e-coordination”. In other more fragmented sectors, like textile or travel,
complete  coordination  is  more  hypothetical  and  it  is  more  likely  that  “pockets”  or
“islands” of  e-coordination will emerge instead. More openness  and  flexibility  between
value chain partners will be required, in terms of exchange and ownership of information,
in order to experience maximum benefits of this extended co-ordination. For companies,
implementation  of  e-commerce  represents  the  next  wave  in  a  series  of  technology
upgrades  and  business  process  reviews,  characteristic  of  deployment  of  ICT  solutions
inside companies, but this time with the addition of important links to the external world.

During the workshop, a number of value chain evolution scenarios (or segments of value
chain  evolution  scenarios)  were  identified  in  the  four  sectors  covered,  as  a  result  of
adoption by firms of e-commerce technologies. These scenarios show that e-commerce is
expected to produce a number of different models, essentially because inherited industrial
structures are seen to play an important role in e-commerce adoption and implementation.

Based on the results of this workshop, it would seem that, at least at the level of market
systems,  the  “new  economy”  is  in  fact  not  very  different  from  “business  as  usual”.
Market  conditions  seem  to  be  dictated  more  by  existing  market  structures  than  by  the
introduction  of  new  technologies.  Firms  will  probably  use  e-commerce  technologies  as
just  another  tool  to  pursue  their  market  strategies.  However,  in  terms  of  how  firms
operate  internally  and  do  business  with  suppliers  and  customers,  it  was  clear  that  e-
commerce technologies are expected to have a very strong impact. Overall, e-commerce
technologies are expected to cause an increase in speed of processing transactions and to
lead to new ways of working.

As was made clear during the workshop, each economic sector will move at its own pace
with the implementation of e-commerce. Firms will therefore feel its impact differently,
according  to  the  sector.  However,  as  e-commerce  technologies  are  thought  to  generate
cost reductions, it is likely that eventually all firms will be affected. It is, in fact, possible
that the impact of e-commerce technologies and practices on firms in the current decade

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Techno-Economic Impact of E-Commerce

will be of the same magnitude as the impact of management techniques, such as just-in-
time or total quality management, were in the 1990’s.

In  terms  of  impacts  on  (and  of)  policies,  current  and  future  e-commerce  developments
would not be possible without prior deregulation of the telecom industry, proper technical
standards, digital signatures, a proper legal framework, etc. SMEs need support to enter
the on-line world. Access issues might also require future policy actions (e.g. because of
the risk of exclusion). Interestingly e-commerce can be a useful tool in order to facilitate
implementation of policies requiring the management and maintenance of large amounts
of information (e.g. policies requiring traceability of products).

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Techno-Economic Impact of E-Commerce

INTRODUCTION

1.1.  Objective of the workshop

The  overall  objective  of  the  workshop  was  to  explore  the  impact  of  e-commerce
technologies on future developments of value chains, with a horizon of 2005.

The horizon of 2005 is the horizon for the drivers that would compel firms to adopt
e-commerce technologies2. This horizon of 2005 for the drivers would correspond to
a  further  horizon  of,  say  2008,  for  seeing  the  actual  impact  on  relations  between
firms along value chains and on market structures.

We chose to work with a rather close horizon because, in this unstable environment,
it did not seem realistic to develop a vision that would remain credible beyond that.

1.2.  Background

This  workshop  was  organised  in  the  context  of  the  OECD  Electronic-commerce
Business Impacts Project (EBIP). EBIP aims to improve understanding of the impact
of e-commerce on economic sectors and of its policy implications. On the basis of a
methodology developed by the Dutch institute TNO-STB, studies were conducted in
the  year  2000  in  ten  participating  countries,  including  six  EU  countries,3  and
covering about fifteen economic sectors. The studies describe  motivations for  pro-
active  firms  to  move  to  e-commerce,  obstacles  and  incentives,  impact  on  their
internal  organisation  and  on  their  relationships  with  value-chain  partners.  The
results of the EBIP project will be presented in a cross-country synthesis report, co-
authored  by  the  OECD,  TNO-STB  and  IPTS,  and  published  by  the  OECD.
Individual studies describe current trends, some national reports also present future
trends.  As  part  of  its  contribution  to  EBIP,  IPTS  organised  this  workshop  with  a
view to exploring the future impact of e-commerce.

1.3.  Interaction between individual firms and value chain characteristics

In order to set the scene further, this section briefly explains how actions taken at the
individual  firm  level  produce  an  effect  on  relations  between  firms  along  value
chains and on market structures.

The EBIP project was originally set up to investigate how business practices (with
regard to e-commerce) impact on market structures in different economic sectors. It

2 

“E-commerce technologies” should be understood here in the widest possible sense. Are first included,
IP-based technologies used by firms, on the one hand with external players for exchange of information
and  for  transactions  (essentially,  as  of  today,  basic  Web  sites,  e-marketplaces,  extranets,  e-mail  and
web  EDI)  and,  on  the  other  hand  also  used  internally  (intranets,  e-mail).  Are  also  included  more
traditional  technologies  like  EDI  over  value-added  networks  (VANs)  and  videotex  (e.g.  the  French
MINITEL)  which  have  been  in  existence  for  more  than  15  years  and  were  the  first  platforms
supporting  electronic  commerce 
technologies  supporting
transactions.  Are  finally 
collaborative  work  across  firms  over  private  or  non-private  networks  (e.g.  tools  for  collaborative
design or logistics management).

included, 

3  Canada, France, Italy, Korea, Mexico, Netherlands, Norway, Spain, Sweden, United Kingdom

9

                                                
Workshop Report

soon became clear that the reverse mechanism is equally – if not more – important.
That  is,  the  ways  market  structures  in  different  sectors  are  facilitating  certain
business  practices  and  constraining  others.  In  this  respect,  the  following  levels  of
analysis can be distinguished:

- 

Individual  businesses  use  new  technology  (e.g.  e-commerce  tools)  in  order  to
improve or change transaction processes (e.g. reducing costs, improving quality
of service, etc.),

-  These new transaction processes contribute to new market developments at the
industry level (e.g. the development of new products, new types of relations with
business partners, new ways to coordinate production, etc.),

-  These  new  market  developments  collectively  affect  organisation  of  inter-firm
relations  in  different  market  places  (e.g.  dis-intermediation,  re-intermediation,
vertical integration, etc.),

-  These market developments contribute to structurally reshape market structures
(characterised  by  number  of  firms,  firm  size,  etc.)  that  in  turn  create  the
conditions (i.e. drivers) under which businesses will want to change transaction
processes (we are back to first bullet above).

In  this  context,  the  workshop  started  with  an  analysis  of  the  drivers  acting  on
individual firms, in order to arrive at an analysis of the effects on value chains and
market structures.

1.4.  Approach

Four of the sectors covered in EBIP were represented at the workshop - automotive,
textile (clothing), travel and banking - in order to keep the group of participants at a
suitable  size  for  effective  brainstorming.  These  sectors  were  chosen  because  their
observations  can  provide  a  good  indication  of  more  general  e-commerce  impacts.
They  represent  a  large  part  of  our  economy,  include  both  tangible  and  intangible
products and are at different stages of advancement in their use of information and
communications technologies (ICTs). In the EBIP studies these sectors are the ones
covered by the largest groups of participating countries.

The workshop was organised over three half days:

-  First  morning:  presentation  of  the  workshop  background,  objective  and
approach; presentation of the list of  drivers identified  in  the  EBIP  studies;  and
discussion  of  future  drivers  (covering  all  sectors,  not  only  the  four  sectors
represented at the workshop).

-  Afternoon:  structured  brainstorming  in  two  subgroups  in  order  to  explore  the
impact of the new drivers and possible scenarios of future effect of e-commerce
on  the  four  represented  sectors  (two  sectors  per  subgroup:  a  subgroup  on
tangible products, the other one on intangible products).

-  Second  morning:  presentation  to  all  and  discussions  of  the  results  of  the
brainstorming  done  in  subgroups;  discussion  of  the  proposed  scenarios;
workshop preliminary conclusions.

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Techno-Economic Impact of E-Commerce

2.  TODAY’S AND TOMORROW’S DRIVERS

2.1.  Presentation of today’s drivers

This section presents a synthesis of the factors identified in the EBIP national sector
studies.  Drivers  are  presented  here  independently  of  sectors.  They  are  listed  under
three categories:

- 

- 

- 

first  the  external  drivers  for  e-commerce  adoption,  over  which  firms  have  no
direct control,

then firms’ motivations for adoption of e-commerce,

and  finally  the  factors  that  act  as  obstacles  or  incentives  to  e-commerce
implementation.

A few words of explanation follow each driver. A more complete explanation can be
found in the workshop background document provided in Annex II.

2.1.1.  External drivers

External drivers are not under the control of any individual firm. They are part
of  the  general  business  environment  and  create  pressure  that  impels
businesses to act or to react. Identified external drivers are:

-  Globalisation  and  trade  liberalisation  that  drives  firms  to  innovate  in
order  to  be  in  a  better  position  to  make  or  remain  in  business  and  that
increase communication needs among companies.

-  Competitive  pressures,  resulting  or  not  from  globalisation  and

liberalisation, which may force companies to adopt e-commerce.

-  Technological inclusion  or  exclusion:  Demands  for  adoption  by  leading
customer  companies,  changing  business  climate  and  new  buying  habits
may drive businesses into the on-line world.

-  Distance: Virtual reduction of physical distance made possible by ICTs is
one of the factors that make firms better able to compete on a global scale.

-  The  “hype”  that  has  surrounded  e-commerce  development  at  least  until
the  end  of  2000,  has  pushed  some  companies  into  using  e-commerce
before  having  all  the  elements  to  evaluate  whether  or  not  it  fitted  the
strategy of their organisation.

2.1.2.  Firms’ motivations

Motivations that are described in this section originate from within the firms.
They  are  often  –but  not  always–  reactions  to  external  drivers.  Identified
motivations are:

-  To reduce costs: The promise of cost reduction is a major motivation for

companies to engage in e-commerce.

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Workshop Report

-  To  increase  speed  and  internal  coordination:  A  better  integration  of
internal company processes, an increased transaction speed and better link
between internal and external processes.

-  To  increase  coordination  of  the  value  chain:  For  many  firms,  an
important motivation for adopting e-commerce is its potential to facilitate
the  management  and  coordination  of  relationships,  of  workflow  and  of
goods flow in the whole value chain.

-  To  develop  and 

improve  external  collaboration:  Web-based
collaboration technologies are expected to enhance firms’ ability to meet
customer needs in a timely fashion.

-  To  create  interdependency  (to  lock  in,  to  be  locked  in):  Firms  see  e-
commerce as a tool to strengthen existing ties with business partners.

-  To create more added value: Another clear motivation is the potential of
e-commerce  and  ICT  tools  to  enable  firms  to  develop  strategies  to  add
value.  E-commerce  is  also  seen  as  the  appropriate  tool  to  support  very
different types of market strategies.

-  To better manage relations with customers: Expected higher customer

satisfaction is a key driver for most companies.

-  To develop competitive advantage: For some firms, being “e-commerce

able” is seen as a competitive advantage.

2.1.3.  Obstacles/incentives

This  section  lists  the  factors  that  have  a  positive  or  negative  impact  on
implementation of e-commerce solutions by companies:

- 

Investment  Factors,  for  example,  high  (or  low)  cost  of  e-commerce
technologies, investment justification, costs sunk in previous investments
(e.g. EDI).

-  Technical factors, for example, interoperability of e-commerce solutions,

standards and security.

-  Organisational  factors,  for  example,  management  and  staff  attitude,

skills and existing organisational structures.

-  Network(ing)  factors,  for  example,  the  critical  mass  required  to
implement e-commerce solutions, firms’ attitude vis-à-vis transparency of
information,  interpersonal  and  social  relations,  requirements  for  partner
selection, certification, performance ranking, etc.

2.2.  Discussion of evolution of the drivers in the future

The  previous  list  of  drivers  was  presented  in  the  first  plenary  session  of  the
workshop. The next workshop session aimed to identify how this list would evolve

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Techno-Economic Impact of E-Commerce

between now and 2005 (which drivers will disappear? new drivers? what is stable?).
Each of the participants was therefore asked:

- to indicate the two most important drivers for the future which were already in the
current list and why,

- to provide a new important driver for the future which was not in the current list.

A list of the most important drivers for 2005 shown in Table 1 was drawn up as a
result.

Table 1: List of most important drivers for 2005

1.  General environment issues

1.1.  Globalisation/Liberalisation
1.2.  Policies: Regulations, Industrial policy,

Environmental policy
Inherited industrial structure

1.3. 

2.  Competitive and sectoral issues

Inclusion/Exclusion/Dominance

2.1. 
2.2.  Competitive positioning

3.  Organisational and inter-firm issues

3.1.  Lock-in
3.2.  Customer Relationship Management
3.3.  Value Chain Coordination

4.  Firm level issues

4.1.  Cost reduction
4.2.  Added value: Quality/Speed

It is instructive to compare this new list of ten drivers to the previous one.

2.2.1.  Stable drivers

the  external  drivers  of  globalisation, 

A number of today’s drivers were seen as remaining relevant by 2005.  These
inclusion  and
were 
competitive  pressures,  and  the  motivations  of  companies  to  reduce  costs,  to
improve  internal  coordination,  to  better  coordinate  the  value  chain,  to  better
manage  relationships  with  customers  and  to  create  interdependency  with
specific business partners. Drivers were grouped in different categories related
to the firms’ environment.

technology 

2.2.2.  New drivers

The external organisational factor inherited industrial structure, which was
only  implicitly  present  in  the  list  of  today’s  drivers  (it  would  fit  under
networking factors), was explicitly included in the list of future drivers. Due
to  the  networking  character  of  e-commerce  technologies,  this  driver,

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Workshop Report

encompassing  for  example,  cultural  factors, 
constraints or barriers to adoption by customers, was seen as highly relevant.

inter-firm  organisational

The  policy  driver  was  also  added,  especially  in  the  context  of  public  safety
and  environmental  sustainability.  This  driver  encompasses,  for  example,  the
need to take into account the precautionary factor and required traceability of
products which involves processing and storing a large amount of information
for  long  periods  of  time.  These  represent  typical  areas  for  actions  at  a
collective level.

2.2.3.  Drivers which disappeared from the list

Investment,  technical  and  (internal)  organisational  factors  are  not,
however, part of the list of drivers for 2005. This does not mean that experts
thought that these factors would not play a role anymore (in fact some of them
were mentioned during the discussion), but the overall consensus was that the
impact  of  these  factors  would  become  less  important  than  that  of  the  other
drivers in the list.

A  possible  explanation  regarding  investment  factors  is  that,  with  increased
adoption  of  e-commerce  technologies,  and  cheaper  solutions  on  the  market,
investment decisions would become easier to make.

The  absence  of  technical  factors  can  be  explained  by  the  fact  that  many
technical  problems  (e.g.  interoperability,  standards,  security)  may  find  a
solution by 2005, or at least that a horizon for identification of a solution will
be  seen  by  then.  In  fact  underlying  technical  issues  were  hardly  mentioned
during the entire workshop.

Internal  organisational  factors,  although  sometimes  cited  as  a  major
obstacle today for e-commerce implementation, are not seen as a major factor
in the future, perhaps because they are deemed to be no more problematic for
e-commerce  implementation  than  for  other  types  of  large  organisational
changes.  E-commerce  implementation  may  just  be  one  of  the  many
transformation steps organisations have to continuously go through.

The external driver “hype” also disappeared. This is not really a surprise.

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Techno-Economic Impact of E-Commerce

3. 

IMPACT ON DEVELOPMENT OF E-COMMERCE IN THE SECTORS

The  next  workshop  session  aimed  to  estimate  the  direction  and  magnitude  of  the
impact of the identified drivers for 2005 on the development of e-commerce in the
sectors.  For  this  purpose,  discussion  took  place  in  two  subgroups:  the  first  one
focussing  on  physical  or  tangibles  goods  (textile  and  automobile  sectors)  and  the
other  one  on  non-physical  services  or  intangibles  (banking  and  travel  sectors).
Conclusions were then discussed in plenary.

The following paragraphs present the estimated future impact of each driver on the
four  sectors,  as  discussed  during  the  workshop.  Impact  is  codified  as  follows:
positive  impact  (+),  negative  impact  (-),  no  significant  identified  impact  (=),  the
number of plus or minus signs indicating the expected magnitude of the impact. A
graphical summary is presented in Figure 1.

Textile

Automotive

Banking

Travel

General business 
environment

Competitive / sectoral 
issues

Organisational and 
inter-firm issues

Firm level issues

Positive 
impact

No significant impact

Negative 
impact

Policies: Regulations, Industrial 
Inherited industrial structure
Globalisation/Liberalisation

Competitive positioning
Inclusion/Exclusion/Dominance

Lock-in

Value Chain Coordination 
Customer Relationship Mngt.

Cost reduction
Added value: Quality/Speed

Figure 1. Most important e-commerce drivers for 2005 with indication by
sector of impact magnitude and direction

3.1.  General business environment issues

3.1.1.  Globalisation/Liberalisation

This  will  remain  an  important  driver.  For  some  sectors  however,  e.g.
automobile,  globalisation is  a  fact  today  and  is  therefore  not  a  future  driver.
For other sectors like textile or travel, it is expected to play a significant role
in the future.

-  Textile (++)

In the textile sector globalisation is a crucial factor. De-localisation to low
wage areas is a long-term trend that existed before e-commerce, but in this
context,  “e-capability”  will  become  crucial.  E-commerce  may  facilitate
de-localisation,  but it creates  an additional layer  of  requirements  on  sub-
contractors.

A second aspect is that international brands will make increasing use of e-
commerce in order to control market access.

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-  Automobile (=)

This is not a new or future driver for the automobile sector.

-  Banking (+)

For  the  banking  sector  globalisation  is  also  a  fact  today.  However,  this
driver is still expected to have an important positive impact in the future.
Scale  economy  is  expected  to  drive  the  incumbents  towards  larger  units
(e.g.  geographical  concentration  of  production  operations)  and  increase
pressure  on  margins.  In  these  larger  markets,  the  only  way  to  reach
customers in a cost-effective way will be through networks. Niche players
will  emerge  as  new  value  chain  intermediaries  and  service  providers,
taking  advantage  of  economies  of  scale  in  specific  activities  on  a  global
basis,  for  instance,  mutual  funds  production,  transaction  processing
services,  Internet  financial  services  brokerage  (with  banks  or  other
intermediaries  as  distributors).  Customer  access  will  require  providing  a
wide  portfolio  of  financial  and  non-financial  services  that  will  require
banks  to  deliver  third  party  products  or  to  distribute  their  own  products
through these new intermediaries.

-  Travel (++)

Globalisation will be a strong driver pushing the travel sector towards  e-
commerce technologies.

3.1.2.  Policies: Regulations, Industrial policy, Environmental policy

Although the policy  driver  was  added  to  the  list  of  important  future  drivers,
limited  expected  impact  was  identified  in  the  discussions  held  on  specific
sectors.  When  such  an  impact  was  identified  it  could  be  either  direct  (e.g.
schemes to encourage e-commerce adoption by firms) or indirect (adoption of
e-commerce tools by firms in order to better comply to a policy requirement,
as detailed in the following).

-  Textile (=+)

Governments could develop e-commerce promotion schemes with funding
incentives  (particularly  towards  SMEs),  and  actions  in  the  education
domain.

-  Automobile (+)

Policies linked with environmental impact (e.g. recycling) and safety (e.g.
traceability) will require keeping available information about the products
for a long period of time.

-  Banking (=)

No  significant  future  impact  identified,  although  policies  leading  to
increased security and trust should have a positive effect, also after 2005.

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Techno-Economic Impact of E-Commerce

-  Travel (=+)

No significant impact identified. Governments could develop e-commerce
promotion schemes with funding incentives (particularly towards  smaller
travel agents).

3.1.3. 

Inherited industrial structure

This  is  an  important  driver,  which  can  have  either  a  positive  or  negative
effect.

-  Textile (--)

This driver is important for the textile sector where it is expected to have a
negative  effect.  The  structure  of  the  textile  industry  is  very  fragmented.
There are very large firms upstream (e.g. fibre  and  fabric  producers)  and
downstream (distribution companies), with a multitude of firms of all size
in  between,  some  of  them  very  small.  Relationships  between  firms  are
therefore  very  diverse  and  difficult  to  standardise.  Furthermore,  there  is
not  a  common  e-commerce  vision  or  strategy  in  the  sector.  These
conditions are expected to prevail in the coming years and to slow down e-
commerce adoption.

Interestingly,  in  the  South  of  Europe  many  textile  SMEs,  like  other
manufacturing SMEs, were constituted after the second world war and are
family-run.  As  a  result,  a  large  part  of  the  textile  sector  is  currently
undergoing a switch in the generation of company  owners,  which should
have a positive effect on adoption of new methods of work supported by
new technology.

-  Automobile (++)

This driver is also important in the automotive sector where it should have
a strong positive effect. The automotive industry is highly integrated, with
today  only  about ten  big car  manufacturers and  about  fifty  main  tier  one
suppliers  world-wide  (these  numbers  are  expected  to  further  decrease  in
the  coming  years).  All  these  players  are  highly  advanced  in  their  use  of
ICTs and are under strong pressure to constantly improve their collective
performance and to extend the use of e-commerce to higher tier suppliers
(tiers  two  and  three).  E-commerce  tools  are  seen  as  providing  the
appropriate solutions to this industry’s challenges.

-  Banking (=+)

This driver is not expected to have a significant impact in the future on e-
commerce  adoption  in  the  banking  sector.  In  fact  it  is  more  the  new
technologies  which  are  expected  to  have  a  strong  impact  on  inherited
structures.  New  payment  methods,  facilitated  by  IT  tools,  can  easily
substitute  traditional  methods.  Traditional  banks  are  under  strong
competitive  pressures  from  actors  that  come  from  other  economic
domains  (e.g.  telecom  companies,  retail  chains).  New  technologies  will
increase  access  of these new  players,  impacting the market structure  (for

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Workshop Report

example, access to the SWIFT new IP network will be less costly and it is
expected  that  new  –smaller–  actors  will  be  able  to  access  this  inter-
banking  infrastructure).  It  is  expected  that  the  banking  industry  structure
will have to dramatically change in order to adapt to the new competitive
environment.

-  Travel (--)

This  driver is expected  to  have  a  strong  negative  impact  on  e-commerce
adoption  in  the  travel  sector.  Like  textile,  the  travel  sector  has  a
fragmented  structure.  On  the  one  hand,  there  are  a  limited  number  of
pivotal players, i.e. the airlines, who own or operate the dominant share of
the tangible assets that characterise this sector. Air travel costs represent a
significant share of the cost of travel packages, and this trend is expected
to  continue  in  the  future.  Airlines  are  organised  in  a  small  number  of
alliances  and  also  flights  are  proposed  on  a  limited  number  of  global
reservation  systems  (today  only  four).  On  the  other  hand,  there  is  a
multitude of very small intermediaries (travel agents) that serve private or
corporate customers. In between, there are large and small travel package
providers  (e.g.  tour  operators).  This  fragmented  structure  is  expected  to
have a negative impact on e-commerce adoption.

3.2.  Competitive and sectoral issues

3.2.1. 

Inclusion/Exclusion/Dominance

This driver refers to future adoption of e-commerce by firms as a function of
adoption  by  value  chain  partners.  Inclusion  may  be  imposed  upon  firms  by
dominant players. This driver is expected to play a strong positive role, except
for the sectors in which most of the actors will already be using e-commerce
tools (e.g. banking).

-  Textile (++)

This is a strong driver in the textile sector, related to the inherited structure
one, but here with the opposite effect. The pivotal players at both ends of
the  value  chain  (brands,  distribution  firms,  firms  leading  or  coordinating
the production process) will lead e-commerce adoption, in order to control
information  exchanged  over  the  value  chain,  both  downstream  and
upstream.  Manufacturers  will  need  to  obtain  information  rapidly  about
actual sales and inventories in order to better plan their operations. Brands
will want to have more visibility (e.g. both fabrics and clothing) down to
the final customer level.

-  Automobile (++)

This driver will continue to play a strong  positive role  in the  automobile
sector.  E-commerce  tools  will  be  adopted  progressively  by  all  players  in
the supply chain (those who do not are expected to lose their business). It
is expected that all tier two suppliers will have adopted e-commerce tools
within five years, and within about ten years, all suppliers at any level.

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Techno-Economic Impact of E-Commerce

-  Banking (=)

In the banking sector this is a non-issue. E-infrastructure exists today both
in the supply (e.g. inter-banking processing) and the customer chains (e.g.
EDI).  It  is  expected  that  all  players  will  be  using  the  tools  within  the
timeframe  considered  (2005).    Internet  will  facilitate  the  development  of
open  standards  throughout  the  sector,  enabling  new  players  to  put  more
pressure on the incumbents, rather than the other way around.

-  Travel (++)

This driver is very important for the travel sector but pivotal players (e.g.
airlines)  may  use  e-commerce  tools  to  exclude,  rather  than  include,
intermediaries from the value-chain (e.g. travel agents).

3.2.2.  Competitive  positioning

This driver refers to the adoption of e-commerce by firms essentially because
their main competitors use it. This driver is not expected to play a significant
role in the future for any of the four sectors, when the current ”wait-and-see”
or  “go-and-see”  strategies  will  not  be  relevant  anymore.  This  driver  can  be
seen as related to the “hype” driver, which is present in the list of drivers for
today, but which was taken out of the list of drivers for the future.

-  Textile (=)

No expected significant future effect.

-  Automobile (=+)

Recent  examples  (e.g.  Covisint)  indicate  that  some  firms  would  join  a
B2B  marketplace  mainly  because  competitors  are  present.  The  effect  of
this driver should diminish in the future.

-  Banking (=)

No expected significant future effect.

-  Travel (=)

No expected significant future effect.

3.3.  Organisational and inter-firm issues

3.3.1.  Lock-in

This driver refers to the motivation of firms to adopt e-commerce in order to
create  interdependencies  with  suppliers  or  customers  and  lock  them  in.  This
driver  is  not  expected  to  have  a  significant  future  impact  in  any  of  the  four
sectors. More open standards and reduced investment costs should help reduce
technology-based interdependencies.

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-  Textile (=)

This driver is not expected to have a significant future impact.

-  Automobile (=)

This driver is not expected to have a significant future impact. Due to the
limited  number  of  players  at  car  manufacturer  and  first  tier  levels,
relationships  are 
trust  and  partnerships.
Relationships  are  now  more  open  than  in  the  past.  Today  the  same
suppliers  already  supply  competing  manufacturers.  It  is  expected  that,
within five years, there will be globally only one supplier, working closely
with the car manufacturers, for each main vehicle system.

increasingly  based  on 

Banking (=)

This driver is not expected to have a significant future impact. In fact, e-
commerce  technologies  could  technically  open  access  to  more  players,
compared  to  today’s  significantly  locked-in  infrastructures  (SWIFT  for
example).

-  Travel (=)

This driver is not expected to have a significant future impact.

3.3.2.  Customer Relationship Management

This is and will be an important driver in all four sectors. Many firms have a
low  level  of  knowledge  of  even  their  direct  customers,  not  to  mention  their
final  customers.  E-commerce  technologies  are  seen  as  the  right  tools  to
address this lack of knowledge. E-commerce technologies can also play a role
in accessing new markets.

-  Textile (++)

In B2B, e-commerce tools could be used to improve relations between one
link of the value chain to the next, and could contribute to reinforce trust
between  value-chain  partners.  In  B2C,  this  driver  could  play  a  positive
role  for  firms  that  want to  create  a  public  identity,  and  establish  a  direct
communication link with their final customers. In both B2B and B2C, this
driver could play a positive role for firms that want to access new markets.

-  Automobile (+)

This driver is also important for the automobile sector, at all levels of the
supply  chain,  in  order  to  achieve  one  hundred  percent  information
visibility.

-  Banking (+)

This is also an important driver for the banking industry, where the aim is
“total personal financial management.”

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Techno-Economic Impact of E-Commerce

-  Travel (++)

CRM  will  be  a  key  factor  for  the  travel  industry,  in  particular  for
intermediaries.    They  need  to  develop  new  revenue  models  based  on
additional services, as ticket sales revenues are expected to decline in the
future.

3.3.3.  Value Chain Coordination

This  driver  refers  to  the  use  of  e-commerce  technologies  to  better  manage
relationships and information exchange along the value chain. This is clearly
an important future driver for all four sectors.

-  Textile (+)

Efficient  exchange  of  information  between  links  of  the  value  chain  is  a
strong  motivation  for  adoption  of  e-commerce  (e.  g.  between  fabric  and
clothing manufacturer and especially between clothing manufacturers and
the large number of executors of simple production phases). This adoption
should increase smoothness in the workflow and relationship optimisation,
leading to more trust between value chain partners. However, because the
textile  sector  is  fragmented,  the  conditions  for  full  value  chain  e-
commerce  coordination  are  not  expected  to  be  realised  for  a  number  of
years, if ever.

-  Automobile (++)

This is, and will remain, a very important driver for the automotive sector.
All the players in the value chain must coordinate their efforts in order to
be able to assemble a large number of parts at a  high  level  of  quality,  in
the  shortest  time  possible,  at  the  lowest  possible  cost.  Coordination
between  supply  chain  partners  is  therefore  a  key  requirement.  Car
manufacturers  and  first  tier  suppliers  have  been  using  EDI  technologies
for this purpose for more than fifteen years. E-commerce technologies will
enable firms in the automotive sector to coordinate the following functions
across the entire value chain:
-  E-procurement,
- 
-  Collaborative  development  of  products,  in  order  to  continuously

Just-in-time logistics management,

decrease the lead time for putting new models on the market.

-  Banking (++)

This driver is also important for the banking sector. Existing (integrated)
value  chains  are  expected  to  fragment  into  multiple  businesses  that  will
have  their  own  source  of  competitive  advantage.  This  fragmentation
should increase the need for coordination between the  new  value  chains’
intermediaries  and  service  providers.  The  need  for  cross-sectoral
partnerships,  when  pursuing  value  addition  strategies,  will  also  lead  to
increased e-commerce transactions.

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-  Travel (++)

Coordination  of  the  value  chain  will  also  be  an  important  driver  in  the
travel sector.

3.4.  Firm level issues

The EBIP studies show that cost reduction and improved internal coordination were
the  two  most  important  drivers  for  firms  to  adopt  e-commerce  technologies.  The
main reason for this is that they improve and increase the distribution of up-to-date
information in digital format and allow immediate and remote access. These drivers
are expected to keep on playing an important role in the coming years. As shown by
the EBIP  studies, e-commerce  opens  up  a  large  number  of  potential  areas  for  cost
reduction.  Just a few examples are given below.

3.4.1.  Cost reduction

-  Textile (++)

E-commerce technologies can bring cost reduction to the textile sector, for
example, by improving logistical support to the flow of materials.

-  Automobile (+++)

For the automotive sector, this driver and the next one (quality and speed)
are  really  the  key  drivers  for  adoption  of  e-commerce.  E-commerce
technologies will enable firms to reduce cost at all stages of car design and
production  and  furthermore  enable  car  manufacturers  to  adopt  more
flexibility in their production processes at lower costs.

-  Banking (++)

In B2B, e-commerce will enable the banking sector to increase economies
of scale, through an increase of access and a reduction of technology costs.
In B2C, e-banking leads to cost reductions for both banks and customers
(e.g.  banking  transactions  can  be  performed  outside  of  physical  bank
offices).

-  Travel (+)

This  is  also  an  important  driver  in  the  travel  sector  (e.g.  elimination  of
intermediaries that do not provide added value).

3.4.2. 

 Added value: Quality/Speed

-  Textile (=+)

This driver seems  to have  low  impact  in  the  textile  sector.  In  the  future,
textile  firms  could  adopt  e-commerce  technologies  to  increase  speed  of
design and production of new collections.

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Techno-Economic Impact of E-Commerce

-  Automobile (++)

As  mentioned  previously,  together  with  the  cost  reduction  driver,  this  is
and will remain a key driver in the automotive sector.

-  Banking (+)

E-commerce  should  help  banks  implement  new  strategies  to  offer
diversified products.

-  Travel (+)

As  in  the  banking  sectors,  e-commerce  should  help  travel  firms  to
implement strategies where complete travel packages including additional
services  are  offered  (e.g.  management  of  travel  expenses  for  corporate
customers, with direct input to the firm accounting system).

23

4.  FUTURE DEVELOPMENT OF VALUE CHAINS

Techno-Economic Impact of E-Commerce

Following  the  discussions  on  the  impact  of  future  drivers,  the  groups  explored
scenarios4 of future development of the value chains in the different sectors, which
would result from the adoption by firms of e-commerce technologies. It is important
to point out here that the objective of this exercise was obviously not to predict the
future but rather to describe possible futures and to provide “food for thought”.

4.1.  Proposed schemes

In  order  to  help  structure  the  discussions,  a  number  of  general  characteristics  that
could  have  an  effect  on  future  development  of  value  chains  were  proposed  to  the
participants.

First, market structure characteristics:

- 

- 

the relative number of firms in a market,

the existence or absence of dominant firms (also called here pivotal firms),

then,  characteristics  of  inter-firm  transactions  systems,  particularly  of  traded
“products” (goods and services) and of transaction flows:

- 

- 

the level of differentiation or homogeneity of the products,

the nature of transaction flows (e.g. steady flows vs. fluctuating flows).

Based  on  these  characteristics,  the  diagrams  shown  in  Figures  2  and  3  were
proposed.  These  diagrams  also  indicate  the  alternative  market  systems  that  would
result from particular combinations of the above characteristics: integration (vertical
integration,  dis-intermediation  and  re-
or  horizontal),  flexible  (or  virtual) 
intermediation.

An  immediate  comment  (discussed  in  the  following  sections)  is  that  the  market
structures  diagram  (Figure  2)  was  found  to  be  a  useful  tool  for  structuring  the
scenario  discussion  process,  though  it  could  be  perfected.  The  transaction  systems
diagram  (Figure  3),  however,  did  not  really  provide  valuable  insights  and  was  not
used as such in the discussions.

4  The  Webster  dictionary  gives  the  following  definition  of  a  scenario  :  “An  account  or  synopsis  of  a
projected course of action or events”. Here, we use the term essentially to describe evolution of a value
chain -or part of it- towards a possible future state.

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Few firms

Integration

Flexible
integration

Pivotal Firms

Equal firms

Dis-
intermediation

Re-
intermediation

Many firms

Figure 2. Market structures

Diversified products

Integration

Flexible
integration

Steady
transaction flows

Fluctuating
transaction flows

Dis-
intermediation

Re-
intermediation

Homogenous products

Figure 3. Transaction systems

4.2.  The discussion per sector

The following paragraphs summarise the discussions that took place in the different
subgroups and in plenary.

4.2.1.  Textile

Although  the  market  structure  diagram  (Figure  2)  was  a  useful  guide  to  the
discussion,  it  rapidly  became  clear  that  it  would  not  be  realistic  to  use  it  to
explore  scenarios  of  development  of  the  textile  value  chain  as  a  whole.  The
diagram  can be used,  however,  to  “zoom-in” on  different  parts  of  the  chain,
characterised by their specific “market systems”, as shown in Figure 4.

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Techno-Economic Impact of E-Commerce

Downstream
distribution

Few firms

“Branded
giants”

Integration

Flexible
integration

Pivotal Firms

Dis-
intermediation

Equal firms

Re-
intermediation

Electronic
coordination

Many firms

Neutral
e-services

Figure 4. Market structures in the textile sector

For the textile sector, four different scenarios were discussed:

1.  The  scenario  “Downstream  distribution”  is  characterised  by  few  pivotal
firms making use of e-commerce as a means of coordination of integrated
distribution chains, based on  branded outlets  and  products. This scenario
is  already  emerging  as  a  near  future  trend  and  appears  to  be  a  strong
scenario.  The  market  can  however  only  support  a  given  number  of
companies in a branded goods area. The likelihood of sustainability of this
scenario will depend on whether competition is on price (in this case, this
scenario appears difficult to sustain in the future) or on quality.  

2.  The scenario “Electronic coordination” is characterised by a large number
of players with the presence of some dominant players (pivotal firms). E-
commerce  is  promoted  by  the  dominant  firms  as  a  means  of  managing
relationships  with  subcontractors  (e.g.  clothing  producers  with  their
subcontractors)  through  common  e-commerce  open  platforms  with
suppliers  working  for  different  pivotal  firms  (no  lock-in).  E-commerce
enables  economies  of  scope  and  scale  and  supports  de-localisation.  This
scenario  does  not  appear,  however,  to  be  the  most  sustainable  one,  as
firms  are  exposed  to  competitive  pressures,  not  only  on  the  quality  and
price sides, but increasingly on the distribution strategy, and on the image
of the companies and products (importance of brands).

3.  The  scenario  “Branded  giants”  is,  like  the  first  one  “Downstream
distribution”, characterised by a smaller number of firms, but in this case
with more equal firms and  with relationships  that  are  based  not  as much
on power as in the first scenario. This scenario would be characteristic of
relationships  between  branded  fabric  producers  and  branded  clothing
producers  at  the  upper  level  of  the  value  chain.  In  this  scenario,  e-
commerce is a tool for flexible integration, where it is used as a platform
for exchange.  Transparency is important and the overall aim is to build a
better market. This is also an emerging scenario.

27

Workshop Report

4.  The last scenario, “Neutral e-services,” is like the second one “Electronic
coordination”,  characterised  by  a  large  number  of  firms,  but  with  more
equal  firms.  This  is  a  scenario  in  which  new  marketplaces  would  be
created, each by a number of small collaborating players, in order to raise
their visibility. This  model could  work  well  where  there  is  a  tradition  of
collaboration,  based  on  a  common  interest  or  regional  location  (for
example, small groups of firms well known to each other).

In fragmented sectors like the textile sector, it is likely that different scenarios
will co-exist, prevailing or emerging in different parts of the value chain.

4.2.2.  Automobile

The market structure diagram (Figure 2) was also used to analyse the situation
in the automobile sector, focussing on the relationships in the upper part of the
value chain (i.e. including car manufacturers and their suppliers).

As  shown  in  Figure  5,  in  this  part  of  the  value  chain,  only  one  scenario,
“Industry-wide e-marketplaces”, seems likely to emerge. It is characterised by
the  major  role  of  a  few  pivotal  actors,  the  car  manufacturers  and  the  most
powerful  tier  one  suppliers  (the  suppliers  that  will  be  able  to  develop  full
“systems” and supply them to several car manufacturers). This limited number
of pivotal players will define the way the market moves. They are expected to
use large e-commerce platforms, which they will co-own, in order to support
supply  chain  coordination,  collaborative  development  and  e-procurement
(possibly  the  number  of  platforms  used  will  be  very  small;  in  this  respect,
developments of the Covisint e-marketplace will be interesting to watch).

Few firms

Industry-wide
e-marketplace(s)

Integration

Flexible
integration

Pivotal Firms

Dis-
intermediation

Equal firms

Re-
intermediation

Sectoral
Marketplaces

Many firms

Common
Platform

Figure 5. Market structures in the automobile sector

More  fragmented  sectoral  marketplaces  (bottom  left  quadrant)  developed  at
upper levels of the supply chain (tiers two and three) may become integrated
in these large industry-wide marketplace(s).

Because of the importance of pivotal firms in this sector, the development of
common platforms acting as intermediaries where many more or less equally

28

Techno-Economic Impact of E-Commerce

powerful players will operate does seem to be a likely scenario (bottom right
quadrant of the diagram in Figure 5).

In  this  sector,  as  discussed  in  previous  paragraphs,  innovation  is  led  by  the
pivotal  firms.  Innovation  is  first  imposed  on  tier  one  suppliers,  and  by  a
domino  effect  sequentially  moves  on  to  upper  tiers.  Because  e-commerce
technologies  are  more  open  and  their  implementation  costs  are  lower,  this
domino  effect  is  not  expected  to  stop  at  the  tier  one  level  as  it  did  for  EDI
implementation. In fact it seems likely that within about five years all tier two
suppliers  will  have  adopted  e-commerce  technologies,  and  that  within  about
ten  years  no  company  will  be  able  to  be  part  of  the  upper  automotive  value
chain  without  using  e-commerce  technologies  for  dealing  with  its  business
partners.

4.2.3.  Banking

The subgroup that worked on the banking and travel sectors used the diagram
shown in Figure 6 in their scenario building exercise. This diagram focuses on
dimensions  from  each  of  the  diagrams  proposed  in  Figures  2  and  3:  i.e.  the
dimension  characterising  diversity  of  the  actors  in  the  market  (here,  banks
only  vs.  diversified  actors),  and  the  dimension  characterising  the  exchanged
products (here, financial products only vs. diversified products).

This type of diagram seems to be more appropriate for intangible products that
can be diversified or bundled more easily than tangible ones.

Old model

Only Banks

Only financial
products

New
entrants

“Giants
aware” and
mutating

Diversified
products

Future
model

Banks and non banks

Figure 6. Evolution of the banking sector

Figure 6 shows a possible scenario for the sector, where new players enter the
market (e.g. insurance, wholesale trade companies, post office companies, or
telecom  companies),  offering  financial  products  in  addition  to  their  other
products (arrow 1), with a parallel mutation of banks offering more diversified
products (arrow 2). This diversification would go together with the break up
of  traditional  integrated  value  chains  and  result  in  increased  intermediation,
facilitated by e-commerce technologies, allowing the different players to take
advantage  of  economies  of  scale.  For  example,  several  players  would  make

29

(cid:1)
(cid:2)
Workshop Report

available the same generic financial products, putting their specific  brand on
them,  but  would  outsource  day-to-day  management  of  these  products  to
common suppliers.

Next, the market structure diagram was used in order to cast a different light
on possible evolution of several segments of the value chain (Figure 7).

Few firms

“Back-office
suppliers”

Entry of new
players

?
Pivotal Firms

Integration

?

Flexible
integration

Dis-
intermediation

Equal firms

Re-
intermediation

“Front-office
firms”

Primary
services

?

Many firms

Figure 7. Market structures in the banking sector

First,  a  distinction  is  made  between  primary  services  (e.g.  providing
traditional  bank  accounts)  and  other  services.  Primary  services  (offered  by
many banks, none with a dominant role in this market) become a commodity.
Little  change  is  expected  in  these  services.  Regarding  the  other  types  of
service, two parts of the value chain are considered: the suppliers of financial
products (e.g. of mutual funds, insurance), called here “Back-office suppliers”
and  the  intermediaries  (banks  and  non-banks)  distributing  these  financial
products  to  their  corporate  or  private  customers,  called  here  “Front-office
firms”.

In both cases, the entry of new players would at first reduce the dominance of
pivotal  firms.   Later, however,  a consolidation of the  market  and  a  return  to
the  initial  states  could  occur.  As  discussed  previously,  the  front-office  firms
may  diversify  their  portfolio  of  products  in  the  process.  Another  possible
evolution,  shown  on  the  chart  with  the  vertical  upward  arrow,  is  the
integration of front-office firms with back office suppliers.

In  this  sector,  relational  innovations  based  on  strong  brands  are  likely  to  be
more important than product innovations. Trust will remain an essential factor
in a sensitive sector fulfilling an institutional role in the economy.

4.2.4.  Travel

Figure 8 presents the identified scenarios for the travel sector, based on quite
similar characteristics to the ones used for the banking sector (Figure 6). Like
the  diagram  in  Figure  6,  it  includes  a  dimension  characterising  the  actors  in
the  market: travel agents vs. “integrated  travel companies”,  and  a dimension

30

characterising  the  traded  products:  dedicated  single  products  (e.g.  flight  +
hotel) vs. full services (e.g. including pre- and post-travel services).

Techno-Economic Impact of E-Commerce

Old model

Travel agents

Single
products

Full service
travel
agencies

Full
services

Emerging
pivotal
players

Integrated travel cies

Figure 8. Evolution of the travel sector

Not surprisingly, the scenarios identified indicate that more complete services
will  be  offered  to  customers.  In  scenario  1,  traditional  travel  agents  extend
their range of services. In scenario 2, the new services are offered by emerging
pivotal  players,  called  here  “integrated  travel  companies”.  These  emerging
pivotal players include for example airlines and global reservation systems. A
possible  third  scenario  sees  some  large  travel  agencies  becoming  pivotal
players and further extending the scope of their services.

Next, the market structure diagram was also used to look at possible evolution
of several segments of the value chain (Figure 9).

Few firms

Integration

Flexible
integration

Pivotal Firms

Electronic
platforms

Dis-
intermediation

Re-
intermediation

Many firms

Equal firms

Added
value

Figure 9. Market structures in the travel sector

The  diagram  in  Figure  9  shows  two  scenarios.  The  “Added  value”  scenario,
where a larger number of firms offer value-added services to their customers
in order to increase loyalty, constitutes a re-definition of the role of traditional
intermediaries  (corresponding  to  scenario  2  in  the  previous  diagram).  The

31

(cid:1)
(cid:2)
(cid:3)
Workshop Report

second  scenario,  “Electronic  platforms”,  is  one  where  existing  electronic
platforms,  based  for  example  on  global  flight  and  hotel  reservation  systems,
increase  their  pivotal  role,  and  possibly  further  integrate  in  large  e-
marketplaces, as was seen likely in the automotive sector case.

32

Techno-Economic Impact of E-Commerce

5.  CONCLUSIONS

In this final section we attempt first to derive conclusions on the future development
of e-commerce and its impact on value chains, on the basis of the analysis done on
the four  sectors.  We  then  propose  a  revised  market  structure  diagram,  as  a  tool  to
support discussion on market evolution. We conclude with a brief analysis of what
was, or was not, achieved in the workshop itself.

5.1.  Main future drivers for e-commerce: From internal coordination tools to

instruments for external coordination

The belief that e-commerce will, in 2005, still be primarily a tool used by companies
to  improve  their  internal  co-ordination  emerged  clearly.  Improved  internal  co-
ordination  will  result  in  reduced  input  costs  (e.g.  reduced  transaction  costs,
increased  transaction  processing  speed)  and  increased  output  value  (e.g.  increased
quality, added value, and customer reach).

is  expected 

to  cover  e-procurement, 

Then firms are expected to extend the benefits of improved internal co-ordination to
improved  coordination  of  relationships  with  value-chain  partners.  This  improved
logistics  and
external  co-ordination 
collaborative  work.  It  will  also  be  combined  with  “substitution”  through  market
mechanisms,  e.g.  search  for  new,  cheaper  and  more  effective  partners.  Dominant
firms  are expected to  play  a  pivotal  role  in  this  enlarged  coordination  process.  the
automobile  sector  appears  to  be  the  most  advanced  of  the  sectors  analysed  (and
probably  of  many  others)  in  this  respect,  though  even  the  upper  part  of  the  value
chain (linking the suppliers to the car manufacturers) is still several years away from
complete “e-coordination”. In other more fragmented sectors, like  textile  or  travel,
complete  coordination  is  more  hypothetical  and  it  is  more  likely  that  instead
“pockets” or “islands” of e-coordination will be seen. More openness and flexibility
between value chain partners will be required, in terms of exchange and ownership
of  information,  in  order  to  experience  maximum  benefits  of  this  extended  co-
ordination.

For  companies,  implementation  of  e-commerce  represents  therefore  the  next  in  a
series of waves of technology upgrades and business process reviews, characteristic
of deployment of ICT solutions inside companies, but this time with the addition of
important links to the external world.

It is worth noting that a number of drivers or obstacles seen as important by firms
today  are  expected  to  play  a  much  less  important  role  by  2005:  e.g.  investment,
technical and internal organisational factors.

5.2.  Impact of adoption of e-commerce technologies on value chains

During  the  workshop,  a  number  of  scenarios  of  evolution  of  value  chains,  or
segments  of  value  chains,  as  a  result  of  adoption  by  firms  of  e-commerce
technologies, were identified in the four sectors covered. These scenarios show that
e-commerce  is  expected  to  produce  a  number  of  different  models,  essentially
because inherited industrial structures are seen as important in e-commerce adoption
and implementation. For example, in the automobile sector the integration scenario

33

Workshop Report

looks probable, because  of large  product development costs and the strong lead  of
the  pivotal  firms.  A  similar  scenario  is  not  likely,  however,  in  more  fragmented
sectors like the textile sector, where various types of market systems are maintained
at different levels of the value chain. In the travel sector, on the supply side, pivotal
firms  could  create  integrated  platforms  as  in  the  automobile  sector.  The  banking
sector may, however, be the exception. In this sector, the entry of new players will
affect  existing  value  chains.  These  are  expected  to  develop  towards  network-
oriented  value  systems  in  which  actors  would  provide  sets  of  complementary
products and services.

In sectors (or parts of sectors) in which dominant firms are present, there could be a
trend  towards  closure  of  markets  through  integration,  rather  than  increased
openness.  In  these  markets,  being  part  of  the  “right”  e-commerce  platform  might
become more a requirement for survival than simply a competitive advantage.

Should we conclude that the “new economy” is not in fact different from “business
as usual?”

On  the  one  hand  the  results  of  this  workshop  would  seem  to  indicate  that,  at  the
level of market systems at least, this may indeed be true. As discussed above, very
diverse  development  scenarios  are  foreseen  in  the  sample  of  sectors  covered.
Existing  market  structures,  rather  than  the  introduction  of  new  technologies,  were
seen  as  dictating  market  conditions.  Firms  will  most  probably  use  e-commerce
technologies as just another tool to pursue their market strategies.

On  the  other  hand,  it  emerged  very  clearly  that  e-commerce  technologies  are
expected  to  have  a  very  strong  impact  on  how  firms  operate  internally  and  do
business  with  suppliers  and  customers.  The  creation  of  new  information  exchange
channels is expected. Where these channels existed before, the speed of information
exchange  is  expected  to  increase.  Information  will  circulate  more  rapidly,  more
accurately and be cheaper to access, handle, store and distribute both externally and
internally. Overall, this should cause an increase in speed of processing transactions
and lead to new ways of working.

Each  economic  sector  is  expected  to  move  at  its  own  pace  with  e-commerce
implementation. Impact within firms will therefore be felt differently, according to
the  sector.  However,  as  e-commerce  technologies  are  thought  to  generate  cost
reductions, it is likely that eventually all firms will be affected. It is in fact possible
that  the  impact  of  e-commerce  technologies  and  practices  on  firms  in  the  current
decade will be of the same magnitude as the impact of management techniques like
just-in-time or total quality management was in the1990’s.

5.3.  Future policies

According  to  the  workshop  discussions,  actors  in  the  sectors  see  the  impact  of
policies on development of e-commerce as limited. Current and future e-commerce
developments  would,  however,  not  be  possible  without  prior  deregulation  of  the
telecom  industry,  proper  technical  standards,  digital  signatures,  a  proper  legal
framework,  etc.  SMEs  also  need  support  to  enter  the  on-line  world.  Access  issues
might also require future policy actions (e.g. because of the risk of exclusion).

34

Techno-Economic Impact of E-Commerce

Interestingly, the workshop showed that e-commerce could support implementation
of  new  policies  requiring  the  management  and  maintenance  of  large  amounts  of
information (e.g. policies requiring traceability of products and their components).

5.4.  Proposal of a modified market structure diagram

As is reported in Section 4.1 above, a set of characteristics arranged in two diagrams
was  proposed  in  order  to  help  structure  the  discussion  on  scenarios.  The  first
diagram  was  based  on  market  structures  (Figure  2)  and  the  second  one  on
transactions  systems  (Figure  3).  The  transaction  system  diagram  was  found  not  to
provide real insight, probably because its two dimensions (products and transaction
flows)  were  not  sufficient  to  capture  the  complexity  of  transaction  systems.  The
market structure diagram, though not perfect -especially in terms of the vocabulary it
uses-  was  found  to  be  a  useful  tool,  as  is  apparent  in  Section  4.2  of  the  report.  It
could however be improved.

We therefore propose a modified market structure diagram, shown in Figure 10 (it
must be emphasised that this modification came after the workshop as a result of the
workshop  discussions,  the  modified  diagram  was  therefore  not  discussed  or  used
during the workshop).

Integrated
Market System
(Extensively Internalised
Mediation)

Few firms

Distributed
Market System
(Partially Externalised
Mediation)

Dominant
Firms

Dis-intermediation

Intermediation

No
Dominant
Firms

Consolidated
Market System
(Partially Internalised
Mediation)

Atomised
Market System
(Extensively Externalised
Mediation)

Many firms

Figure 10. Market structure diagram: a new proposal

Main modifications are:

1.  The vocabulary changed:

- 

- 

labels  of  the  horizontal  axis  were  clarified  (“Dominant  firms”  and  “No
dominant firms” respectively replace “Pivotal firms” and “Equal firms”),

terms  used  to  label  the  four  quadrants  characterise  now  states  of  market
systems  (Integrated,  Distributed,  “Atomised”  or  Consolidated),  rather  than
what  were  in  fact  transitions  in  the  previous  version  (Integration,  Flexible
integration, Re-intermediation, Dis-intermediation).

35

Workshop Report

2.  Transaction  mediation  is  indicated  in  this  diagram  as  being  present  in  all  four

market system states:

- 

for  example,  where  there  are  a  few  dominant  firms,  an  integrated  market
system  would  exist,  i.e.  a  system  in  which  transaction  mediation  is
extensively internalised inside the few dominant firms,

-  or where, to the contrary, there are many non dominant firms, an “atomised”
market  system  would  exist,  in  which  transaction  mediation  is  extensively
externalised, involving additional players in the market (i.e. intermediaries).

3.  Arrows were added to show transitions between states:

- 

- 

transition  from  an  integrated  to  a  distributed  and  then  atomised  market
system,  when  the  dominance  of  firms  decreases  and  the  number  of  firms
increases, is characterised by a process of intermediation,

and transition from an atomised to a consolidated and then integrated market
system,  when  the  dominance  of  firms  increases  and  the  number  of  firms
decreases, is characterised by a process of dis-intermediation.

In this new chart, the addition of the arrows makes clearer the fact that there is no
one-way scenario from one state to another, but an alternation in the market system
between different states, depending on fluctuating market conditions (prompted for
example  by  consolidation  or  de-regulation).  This  diagram  could  be  used  in  further
work.  It  could  also  be  applied  to  the  analysis  of  value  chains  in  the  four  sectors
covered in the workshop as a refinement to the work already done.

5.5.  On the workshop itself

This  final  section  is  a  brief  analysis  of  achievements  of  the  workshop  itself  with
some “words of caution”.

Let us consider first what the group achieved:

-  Based  on  a  list  of  existing  drivers  identified  in  the  national  EBIP  studies,  the
group  proposed  a  list  of  the  most  important  future  drivers  (with  a  horizon  of
2005)  that  would  make  firms  adopt  e-commerce  technologies.  This  list  was
established independently of economic sectors.

-  The group analysed in detail the impact of these future drivers on adoption of e-
commerce technologies by firms in the four sectors, up to the 2005 horizon.

-  For each of the four sectors, the group was able to identify a number of possible
scenarios for the evolution of value chains, or parts or segments of value chains,
as a result of adoption by firms of e-commerce technologies (estimated horizon
of 2008).

-  Based  on  these  scenarios,  general  conclusions  on  impact  of  e-commerce

technologies on firms could be drawn.

36

Techno-Economic Impact of E-Commerce

-  As  a  ‘by-product”,  the  group  demonstrated  that  the  proposed  market  structure
model, based on firm dominance and number of firms in a market, could be used
as a valuable tool for analysing transformation in market systems. As a result of
the  workshop  discussions,  improvements  to  the  model  were  proposed.  It  also
demonstrated that the proposed transaction system model was not applicable in
its original state.

Let  us  conclude  with  a  few  “words  of  caution”.  In  spite  of  these  achievements,  it
could  be  argued  that  the  workshop  did  not  fully  meet  the  initial  objective  of
exploring  the  impact  of  e-commerce  technologies  on  future  developments  of  value
chains. In particular it could be said that it did not identify the general characteristics
of  the  four  sectors  that  could  have  enabled  the  group  to  generalise  its  findings  to
other  sectors  of  the  economy.  Clearly,  analyses  made  in  the  context  of  specific
economic  sectors  cannot  be  generalised 
to  other  sectors  with  different
characteristics.  However,  as  summarised  in  the  above  paragraphs,  the  discussions
were very fruitful as they contributed to our attempts to understand the future impact
of e-commerce  technologies,  and  provided  some  useful  (and  re-usable)  tools.  This
small  workshop  (small  in  its  duration  and  group  size)  raised  a  number  of  very
interesting  points  worth  further  exploration.  The  workshop  should  therefore  be
perceived  as  a  means  of  opening  debate,  and  not  as  a  source  of  final  results.

37

EBIP Scenario Workshop IPTS 05-06 JUNE 2001

Annex I - List of Workshop Participants

ANNEX I

List of Workshop Participants

Ms. Annaflavia BIANCHI
Telecom Italia Lab
San Marco 4826
I-30124 Venezia
Tel: +39 041 52 13260
Fax: +39 041 52 32245
Email: annaflavia.bianchi@tilab.com

Prof. Richard HAWKINS
TNO-STB
Postbus 6030
NL-2600 JA Delft
Tel: +31 15 269 54 27
Fax: +31 15 269 54 60
Email: hawkins@stb.tno.nl

Mr. Jean-Pierre LE BOT
GALIA
96 Avenue du Général Leclerc
F-92514 Boulogne Billancourt Cedex
Tel: 00 33 1 41 31 68 72
Mobile: 00 33 6 08 96 92 80
Email: lebot@galia.com

Ms. Maria del Carmen MARGELI
FUNDACIO CETEMMSA
Bolmes 37-39
E-08301 Mataró
Tel: +34 937 419 100
Fax: +34 937 419 228
Email: Cmargeli@cetemmsa.es

Ms. Catalina MARTINEZ
O.E.C.D.
Directorate for Science, Technology and Industry
2 Rue André Pascal
F-75775 Paris Cedex 16
Tel. 33-1-45.24.93.67
Fax. 33-1-45.24.92.32
Email: Catalina.MARTINEZ@oecd.org

Mr. Carlos MATAIX
ANFAC
c/ Bernardino de Sahagún, 24
E-28036 Madrid
Tel:  91 343 1342
Fax: 91 345 0377
Email: cm.anfac@odette.es

Prof. Leif METHLIE
Professor of Information Management
Department of Strategy and Management
Norwegian School of Economics and Business
Administration
Breiviksveien 40
N-5045 Bergen
Tel: +47 95 92 47
Fax: +47 95 95 40
Email: leif.methlie@nhh.no

Ms. Aina PONS
Fundación IBIT
Reverend Francesc Sitjar, 1
E-0710 Palma de Mallorca
Fax: +34 971 177 279
Email: apons@ibit.org

Prof. Pascal VERHOEST
TNO-STB
Postbus 6030
NL-2600 JA Delft
Tel: +31 15 269 54 27
Fax: +31 15 269 54 60
Email: verhoest@stb.tno.nl

Annex I - List of Workshop Participants

EBIP Scenario Workshop IPTS 05-06 JUNE 2001

IPTS:

Mr. Marc BOGDANOWICZ
IPTS-JRC
European Commission
WTC
Calle Inca Garcilaso, s/n
Isla de la Cartuja
E-41092 Sevilla
Tel: +34 95 448 8413
Fax: +34 95 448 8208
Email: marc.bogdanowicz@jrc.es

Mr. Jean Claude BURGELMAN5
Tel: +34 95 448 8313
Fax: +34 95 448 8208
Email: Jean-Claude.Burgelman@jrc.es

Mr. Bernard CLEMENTS
Tel: +34 95 448 8449
Fax: +34 95 448 8208
Email: bernard.clements@jrc.es

Ms. Clara CENTENO
Tel: +34 95 448 8352
Fax:+34 95 448 8208
Email: Clara.Centeno@jrc.es

Mr. Paul DESRUELLE
Tel: +34 95 448 8329
Fax: +34 95 448 8208
Email: paul.desruelle@jrc.es

Mr. Ken DUCATEL
Tel: +34 95 448 8382
Fax: +34 95 448 8326
Email: ken.ducatel@jrc.es

Mr. Yves PUNIE
Tel: +34 95 448 8229
Fax: +34 95 448 8208
Email: yves.punie@jrc.es

5 At the time of the workshop, Prof. Burgelman was with SMIT-VUB, Pleinlaan, 2, B-1050 Brussels

40

                                                
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Annex II - Workshop Background Document

ANNEX II

EUROPEAN COMMISSION
DIRECTORATE-GENERAL JRC
JOINT RESEARCH CENTRE
Institute for Prospective Technological Studies  (Seville)
Life Sciences and Information and Communication Technologies (LS&ICT)

E-COMMERCE BUSINESS IMPACTS PROJECT (EBIP)
SCENARIO WORKSHOP

INSTITUTE FOR PROSPECTIVE TECHNOLOGICAL STUDIES (IPTS)
SEVILLE, SPAIN
05-06 JUNE 2001

Background Document

Preliminary remarks:

The purpose of this background document is to present the objective of the workshop, the
approach  that  we  will  follow  and  to  provide  a  description  of  the  items  that  we  will
discuss in the first plenary session. Participants are not asked to prepare a presentation
in  advance  of  the  workshop.  They  will  be  asked  however  to  contribute  actively  to  the
discussions  that  will  take  place  all  along  the  workshop,  with  their  experience  and
knowledge of their sector, of ICTs development and of the economy in general.

In order to participate effectively to the first workshop discussions, it is expected that the
participants  are  familiar  with  the  contents  of  this  document  which  are  based  on  the
output of the different EBIP national studies.

We  would  like  to  thank  you  in  advance  for  your  interest  and  contribution,  and  look
forward to a very productive workshop!

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CONTENTS:

1.

INTRODUCTION

1.1. OBJECTIVE OF THE WORKSHOP

1.1.1.

1.1.2.

1.1.3.

1.1.4.

1.1.5.

EBIP context

Where are we in the project?

What are we trying to achieve with the scenario workshop?

Why have this workshop now and at IPTS?

What will be the output of the workshop?

1.2.

INTERACTION BETWEEN INDIVIDUAL FIRMS AND VALUE CHAIN CHARACTERISTICS.

1.3. WORKSHOP APPROACH

2.

PRESENTATION OF THE DRIVERS

2.1. EXTERNAL DRIVERS

2.1.1.

2.1.2.

2.1.3.

2.1.4.

2.1.5.

Hype

Globalisation/liberalisation

Distance

Competitive pressure

Inclusion/exclusion

2.2. FIRMS’ MOTIVATIONS

2.2.1.

2.2.2.

2.2.3.

2.2.4.

2.2.5.

2.2.6.

2.2.7.

2.2.8.

Reduce costs

Increase speed and internal coordination

Increase coordination of the value chain

Develop/improve external collaboration

Create interdependency (to lock-in/to become locked-in)

Create more added value

Better manage relations with customers

Develop competitive advantage

2.3. OBSTACLES/INCENTIVES

2.3.1.

2.3.2.

2.3.3.

2.3.4.

Investment Factors

Technical factors

Organisational factors

Network(ing) factors

2

2

2

2

2

3

3

3

3

4

4

4

4

4

5

5

5

5

5

6

6

7

7

7

8

8

8

8

9

9

3.

CONCLUDING REMARKS

10

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1. 

INTRODUCTION

1.1.  Objective of the workshop

1.1.1.  EBIP context

The Electronic commerce Business Impacts Project (EBIP) launched
by  the  OECD  aims  to  improve  understanding  of  the  impact  of  e-
commerce  on  economic  sectors  and  its  policy  implications.  On  the
basis  of  a  common  methodology  developed  by  the  Dutch  institute
TNO,  surveys  were  conducted  in  Year  2000  in  ten  participating
countries, including six EU countries,6 and covering fifteen economic
sectors. The surveys describe motivations for the firms to move to e-
commerce,  obstacles  and  incentives,  impact  on  their  internal
organisation and on their relationships with value-chain partners.  At
the  international  level,  the  results  of  the  EBIP  project  will  be
presented  in  a  cross-country  synthesis  report  to  be  published  by  the
OECD, and of which OECD, TNO and IPTS are co-authors.

1.1.2.  Where are we in the project?

National  surveys  are  now  finalised.  Most  of  the  survey  results  have
been sent to the OECD and a number of national reports covering the
different economic sectors analysed by the  national  teams  were also
provided. On this basis, the EBIP synthesis report is currently being
written.  A  first  draft  will  be  presented  at  the  next  meeting  of  the
OECD  Ad  Hoc  Technical  Expert  Group  of  the  Working  Party  on
Information Economy, to be held in Paris on 12 and 13 June.

1.1.3.  What are we trying to achieve with the scenario workshop?

The overall objective of the workshop is to explore the impact of e-
commerce technologies on future developments of value chains, with
an horizon of 2005. By the end of the workshop we should be able to
identify some scenarios of future development of value chains. These
scenarios  will  describe  “possible  futures”  but  are  not  “prediction  of
the future”. The horizon of 2005 was selected because it is reasonably
close to enable workshop participants to develop a plausible vision in
a rather unstable area.  In order to keep the group at a size such that
effective brainstorming can take place, only four of the fifteen sectors
covered in EBIP are represented at the workshop (automotive, textile,
travel  and  banking).  These  sectors  are  however  deemed  to  be
sufficiently  diverse  to  allow  for  generalisation  of  some  of  the
conclusions 
the  economy  with  similar
characteristics.

to  other  sectors  of 

6  Canada, France, Italy, Korea, Mexico, Netherlands, Norway, Spain, Sweden, United Kingdom

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1.1.4.  Why have this workshop now and at IPTS?

As  a  prospective  studies  research  institute,  IPTS  is  engaged  in
assessing  the  future  developments  and  consequences  of  emerging
technologies  on  the  economy  and  society,  in  support  of  EU  policy
development. For IPTS, the results of the workshop should therefore
contribute  to  a  better  understanding  of  the  issues  for  future  policy
making  and  help  to  define  research  needs.    It  will  also  help  set  the
agenda  for  further  IPTS  research  in  this  and  related  areas.    But  this
activity is also designed to contribute to the EBIP synthesis report. Its
chapter  on  future  trends  in  the  development  of  market  structures
should be based for the most part on the workshop results.

1.1.5.  What will be the output of the workshop?

IPTS,  with  support  of  the  EBIP  team,  will  prepare  a  detailed
workshop  report  that  will  be  circulated  to  the  participants  for  their
comments.  As  mentioned  above,  this  report  will  form  the  basis  for
the text of the EBIP synthesis report  chapter on  future  trends  in  the
development of market structures.

1.2. 

Interaction between individual firms and value chain characteristics.

The  original  EBIP  project  was  set  up  to  investigate  how  business  practices
(with  regard  to  e-commerce)  impact  on  market  structures  in  different
economic sectors.  It soon became clear that the reverse mechanism is equally
–  if  not  more  –  important.  That  is,  the  way  market  structures  in  different
sectors  are  facilitating  certain  business  practices  and  constraining  others.    In
this respect four levels of analysis can be distinguished:

•  How  individual  businesses  use  ICTs  to  improve  or  change  transaction

processes (e.g. reducing costs, improving quality of service, etc.),

•  How 

these  new 

to  new  market
transaction  systems  contribute 
developments at the industry level (e.g. the development of new products,
organisational models, production methods),

•  How  these  new  business  practices  collectively  affect  the  way  inter-firm
relations are organised in different market places (e.g. dis-intermediation,
re-intermediation, vertical integration, etc.),

•  How  market  developments  contribute  to  structurally  reshape  market
systems (number of firms, firm size, number of competitors, etc.), which
in turn create the conditions under which businesses will want to change
transaction processes (we are back to first bullet above).

1.3.  Workshop approach

In the workshop, we will gradually work  our way up  through these  different
levels  of  analysis,  in  successive  brainstorming  sessions.    By  means  of
introduction,  the  following  section  focuses  on  the  first  level  of  analysis  by
analysing what drives business to engage into e-commerce.

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2.  PRESENTATION OF THE DRIVERS

This  sections  present  a  synthesis  of  the  factors  identified  in  the  different  EBIP
national sector studies that drive firms to engage into e-commerce, but also in some
cases  that  may  be  obstacles  to  e-commerce  implementation.  Drivers  are  presented
here  independently  of  the  sectors,  although  some  examples  relate  to  a  specific
sector. Drivers are listed under three categories:

- 

- 

- 

first the drivers external to the firms, on which they have no direct control,

then the firms’ motivations for adoption of e-commerce,

and  finally  the  factors  that  act  as  obstacles  or  incentives  to  e-commerce
implementation.

2.1.  External drivers

External drivers are not under the control of any individual firm. They are part
of  the  general  business  environment  and  create  a  pressure  that  impels
businesses to act or to react.

2.1.1.  Hype

“Hype”  has  surrounded  e-commerce  development  at  least  until  the
end of 2000. Rather than developing a vision and adopting a strategic
approach  to  e-commerce  adoption,  a  number  of  firms  are  being
driven by “faith” in long term benefits. In some cases, firms indicate
that  for  them,  one  of  the  drivers  was  the  fact  that  e-commerce  is
perceived  to  be  more  modern  and  to  lead  to  a  new  image  of  the
company  and  that  successful  e-commerce  adoption  is  expected  to
enhance  visibility  of  the  company.  Some  companies  start  using  e-
commerce without considering first whether  it  fits  in the  strategy of
their organisation.

2.1.2.  Globalisation/liberalisation

Globalisation and trade liberalisation are certainly among the external
factors that drive firms to innovate in order to be in a better position
to  make  or  remain  in  business.  E-commerce  is  part  of  restructuring
and survival strategies in the global environment. Alliances between
online business in different countries made possible by ICTs provide
global sales opportunities.

2.1.3.  Distance

One of the factors that make firms better able to compete on a global
scale is the reduction of physical distance made possible by ICTs. In
some  sectors,  e.g.  the  automotive  sector,  the  different  players  must
combine  co-operative  work  and  physical  distance.  Using  ICTs  is
therefore  a  necessity.  When  companies  rely  heavily  on  distant
suppliers  or  customers,  e-commerce  technologies  make  possible  a
more efficient production process management.

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2.1.4.  Competitive pressure

Competitive  pressures,  resulting  or  not  from  globalisation  and
liberalisation, may force established companies to adopt e-commerce.
These  competitive  pressures  can  be  a  result  of  adoption  of  e-
commerce itself by competitors. Some firms are also forced to adopt
e-commerce solutions in order to keep their customers.

2.1.5. 

Inclusion/exclusion

Firms do not want to be left behind when new developments emerge.
Rapid  technological  change  entails  constant  upgrading  of  product
lines, skills and working methods. New consumer buying habits and
changing business climate are driving businesses large and small into
the on-line world.

When tight co-ordination of the value chain is necessary, e-commerce
tools are more and more required for doing business with key value-
chain  partners.  It  follows  that  implementing  a  certain  e-commerce
trajectory  creates  path  dependency.  For  example,  for  a  number  of
firms  in  the  automotive  sector  there  is  no  alternative  to  adopting  e-
commerce in order to remain in business. Often, large companies lead
B2B developments for the entire value chain.

2.2.  Firms’ motivations

Motivations  which  are  described  in  this  sections  originate  from  within  the
firms. They are often –but not always– reactions to external drivers.

2.2.1.  Reduce costs

The  promise  of  short  term  financial  rewards,  and  particularly  cost
reduction,  is  a  major  motivation  for  companies  to  engage  in  e-
commerce.  Many  companies  believe  that  e-commerce  will  bring
benefits  in  terms  of  cost  reduction,  for  example,  in  reducing
marketing, training, inventory management and procurement costs.

Companies believe that e-commerce will enable them to save on cost
of  purchased  components,  but  also  on  the  costs  of  the  procurement
process  itself,  by  digitising  the  transaction  and  therefore  reducing
human  intervention  and  eliminating  information  redundancy.  They
expect  reduced  inventory  costs  as  a  result  of  reduced  replenishment
cycle times, lower inventory levels and less out-of-stock problems. In
high  volume  markets,  where  speed  and  price  are  key  elements,  e-
commerce is seen as central to cost reduction.

2.2.2. 

Increase speed and internal coordination

A  better  integration  of  internal  company  processes,  an  increased
transaction  speed  and  better  link  between  internal  and  external

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processes are three important motivations for companies to  adopt  e-
commerce.

Major  positive  expected  impact  of  e-commerce  is  on  internal
processes.  Internet  is  seen  as  a  tool  to  improve  productivity  and
efficiency  within  the  firm  itself.  Linking  physical  processes  (e.g.
production,  logistics)  with  administrative  processes  is  considered
very important. It is also expected that the use of e-commerce will be
equally  important  in  secondary  business  processes  (e.g.  human
resources)  as  in  primary  ones.  Firms  believe  that  automated
information flows are more reliable than non-automated ones.

Related to better internal coordination, transactions speed increase is
a  major  motivation  for  companies  to  engage  in  e-commerce.  Firms
expect  that  e-commerce  will  enable  them  to  implement  rapid
intercommunication  through  all  levels  of  the  organisation,  resulting
in shorter cycle times.

linking 

Firms believe that e-commerce will create a profound change on their
organisation,  but  for  many,  e-commerce  will  generate  maximal
benefits  when 
transaction
processes.  Transaction-generated  information  can  be  shared  across
different  business  functions  and  with  external  partners.  Expected
savings  from  adopting  e-commerce  tools  will  be  higher  the  more
integrated e-commerce tools are with the firm’s internal systems (e.g.
ERP system).

internal  with  external 

2.2.3. 

Increase coordination of the value chain

For many firms, an important motivation for adopting e-commerce is
its  potential  to  facilitate  the  management  and  coordination  of
relationships  in  the  supply  chain.  For  example,  some  firms  want  to
build  a  real-time  web-based  information  exchange  mechanism  with
their whole supplier base. In some sectors (e.g. automotive sector) the
speed  of  information  exchange  in  the  chain  is  crucial  to  all  players
and reduction of product time cycles is one of the main motivations
for adopting e-commerce tools.

Clearly, this motivation is not always internal to each firm part of the
value  chain, as some key players can  lead or  enforce  adoption  of  e-
commerce by -large parts of- a value chain (as  we saw  above under
the  external  driver  inclusion/exclusion).  The  higher  the  bargaining
power of a player in the supply chain, the more likely it will become
the leading force in the adoption of a new technology.

2.2.4.  Develop/improve external collaboration

Web-based collaboration technologies are expected to enhance firms’
ability  to  meet  customer  needs  in  a  timely  fashion.  Firms  see  e-
commerce as particularly well adapted for large knowledge-intensive
collaborative operations, e.g. engineering projects.

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2.2.5.  Create interdependency (to lock-in/to become locked-in)

Firms  see  e-commerce  as  a  tool  to  strengthen  existing  ties  with
business partners: e-commerce can contribute to strengthen preferred
long-term  relationships  with  suppliers  (and 
lock-in
situations) and it can also contribute to increase customer loyalty.

to  create 

2.2.6.  Create more added value

them  “virtually” 

Another  clear  motivation  is  the  potential  of  e-commerce  and  ICT
tools to enable firms to develop strategies to add value. For example,
firms  expect  that  e-commerce  innovations  will  enable  them  to
concentrate on high-value added activities and to outsource low-value
added  ones,  while  keeping 
integrated  (e.g.
distribution  companies  can  use  e-commerce  to  become  primarily
information  managers,  merely  brokering  direct  delivery  from  the
supplier  to  the  customer  and  outsource  the  physical  moves  and
storage).  For  a  number  of  firms,  e-commerce  will  enable  them  to
propose  new  value-added  services  and  improvements  in  the  ease  of
transactions.  For  example,  to  offer  bundled  services  which  will
transform  the  product  sold,  or  to  provide  real-time  tracking  of
transported goods.

E-commerce is seen as the appropriate tool to support very different
types  of  market  strategies,  for  example  either  market  expansion  or
niche  market  development.  On  the  one  hand,  there  are  firms  that
believe  that  e-commerce  will  facilitate  improvements  in  product
offerings, service quality, market coverage, monitoring and costs, that
e-commerce can be a tool for finding new products and reaching new
markets. On the other hand, other firms believe that e-commerce will
not  always  facilitate  expansion  to  new  market  segments,  but  can
support  focusing  on  niche  market  segments.  E-commerce  tools
should  enable  firms  to  implement  one-to-one  marketing  and  mass
customisation strategies.

Internally  also,  firms  expect  that  e-commerce  will  enable  them  to
shift (human) resources to higher value-added tasks.

2.2.7.  Better manage relations with customers

Expected  higher  customer  satisfaction  is  a  key  driver  for  most
companies.  E-commerce  enables  firms  to  reach  final  customers
directly,  and  opportunities  given  by  online  distribution  channels  are
expected to be maximised by moving closer to the consumer,

Firms  believe  that e-commerce  techniques  will  allow  them  to  better
manage  customer  relations  and  cost-effectively  obtain  information
about  their  customers  and,  as  a  result,  to  increase  their  competitive
advantage and market share.

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2.2.8.  Develop competitive advantage

Some  firms  indicate  that  they  see  the  fact  of  being  “e-commerce
able” as a competitive advantage.

2.3.  Obstacles/incentives

In this section are listed the factors that have a positive or negative impact on
implementation of e-commerce solutions by companies.

2.3.1. 

Investment Factors

The cost of the appropriate e-commerce technology solutions and the
required  training  effort  are  important  hurdles  for  some  companies,
especially SME’s. Also, firms that have a large investment sunk into
previous  generation  technologies  that  still  provide  valuable  services
are  unwilling  to  abandon  them  precipitately  (e.g.  investments  in
traditional EDI).

Lack  of  tools  and  models  able  to  provide  quantified  impact  of  e-
commerce technologies is an additional obstacle. Firms need to have
sufficient financial stability to test new technologies, in order to take
the risk of implementing e-commerce solutions.

Other companies however indicate that e-commerce costs need not be
high and that investment costs could easily be justified. Diminishing
equipment  and  software  prices  increase  the  affordability  of  e-
commerce  applications.  Web-based  technologies  are  often  more
affordable that closed systems (e.g. Web EDI).

Some firms outsource ICT services as a low-cost solution to enter the
online world (minimising the need to invest in technology and skills).
Others  acquire  initial  capital  investments  through  partnering  or
venture capital.

2.3.2.  Technical factors

Interoperability  is  an  important  aspect  of  e-commerce  solutions.
Internally,  full  benefits  of  applying  e-commerce  tools  will  only  be
achieved  if  they  are integrated in the  firms’  internal  systems  (which
means also that harmonisation of information systems within the firm
is  fundamental  for  the  adoption  of  e-business).  Externally,  status  of
technology  development  of  value-chain  partners  has  an  important
effect  (positive  or  negative)  on  e-commerce  development  in  a
company.

Standards  are  a  prerequisite  for  introducing  electronic  commerce.
As  an  open  standard,  Web  technologies  (as  opposed  to  private
networks) reduce obstacles to adoption of e-commerce. For example,
emergence  of  the  XML  standard  offers  the  promise  to  be  able  to
easily.
support 

services  more 

configured 

products 

and 

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Standardisation  of  procedures,  codifications,  etc.  are  also  essential
but still lacking.

Additional  technical  factors  include  bandwidth  availability,  e-
payment solutions (also linked to standards), real or perceived lack of
sufficient  level  of  security  and  data  protection,  and  barriers  to
digitisation  (e.g.  of  smell,  feel,  exact  colours,  need  for  paper  audit
trails, etc.).

2.3.3.  Organisational factors

A  number  of  organisational  factors  act  in  support  or  against  e-
commerce implementation within firms.

A factor that is often mentioned is management attitude, which can
be a driver or an obstacle. Top management attitude and involvement
is often key to the implementation of e-commerce.

A  second  factor  is  the  attitude and  skills  of  staff,  including  senior
staff. Cultural factors can be a barrier. E-commerce creates a “digital
divide”  also  within  companies  and  implementing  e-commerce
requires  a  change  of  attitude.  Staff  that  cannot  adapt  may  have  to
change  position  or  job.  Lack  of  skills  within  a  company  is  also  a
barrier.

Existing organisational structures can also be a barrier or an asset.

2.3.4.  Network(ing) factors

A  first  networking  factor  is  critical  mass.  Apart  from  the  technical
dependency  factors  mentioned  above,  successful  implementation  of
e-commerce practices by a firm, depend on the level of “e-commerce
readiness” of the networks they are in. For example, when a firm has
few  (powerful)  customers  and  this  customer  base  is  stable,  its
process/relational  innovation  behaviour  is  constrained  by  conditions
dictated  by  its  customers.  E-commerce  take-up  depends  also  on  the
nature of the sector: it is more difficult when the sector is composed
of  a  majority  of  small  entities  with  a  large  number  of  different
“crafts” (e.g. like in the textile sector).

A second one is the attitude of companies vis-à-vis transparency of
information  in  their  networks.  E-commerce  requires  an  important
change of attitude regarding information exchange between supplier-
chain partners. Companies would like to have  more production  data
from their suppliers but are not willing to  provide  own  data  to  their
customers.  A  discussion  on  the  question  of  “who  owns  the
information?” has to take place.

A third factor under this category can be called social relations. Even
when  entire  transaction  processes  can  be  digitised,  there  will  be

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situations  when  face-to-face 
necessary.

transactions  will  continue 

to  be

3.  CONCLUDING REMARKS

The  above  list  of  drivers  will  be  discussed  in  the  first  plenary  session  of  the
workshop.  From  there,  we  will  gradually  work  our  way  up  through  the  successive
levels  of  analysis  indicated  in  Section  1.2  with  the  overall  objective  to  identify
scenarios of future development of value chains, taking an horizon of 2005.

10